I see tht Hostess Brands is folding its hand after a rancorous bloodletting with its unions--heading for liquidation in bankruptcy under Chapter 7. Management says it is the fault of the unions. Unions say it's the fault of a heartless Bain-style destruction--"real products Americans love," says AFL-CIO President Richard Trumka" (cough).
Well, two things. One, learn Buce's law: when a company says its problem is all the fault of the unions, the one thing you can be sure of is that it is not all the fault of the unions. The union problem is bound to be a symptom of a larger problem in management discipline or creativity. And blaming it on the unions is pretty clear evidence of a failure to take responsibility or, perhaps even more likely, stark incomprehension of what the problem really might be.
Take Twinkie, Hostess' marquee product. Forget the jokes about how it will be around until the next ice age. Focus instead on the fact that it has been around since the last ice age, as unchanged in concept as it is apparently durable in manufacture. And as Bill Rochelle (see infra) likes to say, this is an industry where tastes change, and where products must change or be left behind. There are a lot of companies in the snack food biz/ The successful companies are the ones that innovate to beat the band. Think Procter & Gamble. Think Frito-Lay. Think Grupo Bimbo. Say you want about the misallocation of resources, the crime of capitalism, the gross waste of energy and effort, these guys are people who know how to make money under the existing rules. If the Hostess people didn't understand that, they don't deserve to run a major commpany, and their workers are paying the price.
But there is a second wrinkle here. Hostess may "liquidate in Chapter 7," but Hostess very likely is not dead yet. The financial press is quoting Those in the Know as saying that the case is all about the brands--the trademarks, the attendant intellectual property, the great name of Twinkie and suchlike. The talk is that the ought to attract serious bidders and draw cash into the bankruptcy estate.
And? And who knows? And begin to produce something, anything, who knows what, under the Twinkie name. Fine, it happens all the time. But here's a guess: I suspect that whatever gets fobbed off as a Twinkie henceforth will differ from the former Twinkie in one vital respect and that is it will come from a non-union shop. So the simple explanation of the liquidation/sale here may be that it is just an efficient way of getting out from under what Twinkie couldn't get out from under otherwise.
Acknowledgment: Some of this is inspired by the insights of the world's greatest bankruptcy journalist, Bill Rochelle at Bloomberg. Here's Rochelle on Hostess's bankruptcy filing back in January. And for a mid-gme update, go here (at1:52). And ask Bill to tell you what he thinks of Drake's Cakes.
Update: Too true, too true.
Well, two things. One, learn Buce's law: when a company says its problem is all the fault of the unions, the one thing you can be sure of is that it is not all the fault of the unions. The union problem is bound to be a symptom of a larger problem in management discipline or creativity. And blaming it on the unions is pretty clear evidence of a failure to take responsibility or, perhaps even more likely, stark incomprehension of what the problem really might be.
Take Twinkie, Hostess' marquee product. Forget the jokes about how it will be around until the next ice age. Focus instead on the fact that it has been around since the last ice age, as unchanged in concept as it is apparently durable in manufacture. And as Bill Rochelle (see infra) likes to say, this is an industry where tastes change, and where products must change or be left behind. There are a lot of companies in the snack food biz/ The successful companies are the ones that innovate to beat the band. Think Procter & Gamble. Think Frito-Lay. Think Grupo Bimbo. Say you want about the misallocation of resources, the crime of capitalism, the gross waste of energy and effort, these guys are people who know how to make money under the existing rules. If the Hostess people didn't understand that, they don't deserve to run a major commpany, and their workers are paying the price.
But there is a second wrinkle here. Hostess may "liquidate in Chapter 7," but Hostess very likely is not dead yet. The financial press is quoting Those in the Know as saying that the case is all about the brands--the trademarks, the attendant intellectual property, the great name of Twinkie and suchlike. The talk is that the ought to attract serious bidders and draw cash into the bankruptcy estate.
And? And who knows? And begin to produce something, anything, who knows what, under the Twinkie name. Fine, it happens all the time. But here's a guess: I suspect that whatever gets fobbed off as a Twinkie henceforth will differ from the former Twinkie in one vital respect and that is it will come from a non-union shop. So the simple explanation of the liquidation/sale here may be that it is just an efficient way of getting out from under what Twinkie couldn't get out from under otherwise.
Acknowledgment: Some of this is inspired by the insights of the world's greatest bankruptcy journalist, Bill Rochelle at Bloomberg. Here's Rochelle on Hostess's bankruptcy filing back in January. And for a mid-gme update, go here (at1:52). And ask Bill to tell you what he thinks of Drake's Cakes.
Update: Too true, too true.
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